Despite the Environmental Protection Fund (EPF) account holding 40 million US dollars, a combination of factors, notably a severe shortage of skilled environmental inspectors and regulators at the Ministry of Mines, is undermining the Zambian government’s ability to safeguard the environment.
The Department of Mines and Safety in the Ministry of Mines and Mineral Development, equipped with only six inspectors, confronts a monumental task of conducting environmental audits for over a hundred mining companies across the nation.
The issue has reached a critical juncture, with reports indicating that over 400 mines have failed to adhere to the EPF requirements and regulations.
Established by the Zambian government, the EPF plays a crucial role in supervising the rehabilitation of mining areas. This fund is responsible for enforcing environmental impact statements, mitigating potential liabilities, and has been operational since 2008.
In an interview with MakanDay, Morgan Katati, Chief Executive Officer of the Zambia Institute of Environmental Management (ZIEM), emphasised the significance of funding and stressed the importance of all mining companies adhering to compliance measures. He argued that this is essential for reducing environmental liabilities and addressing the lasting impacts of mining activities.
Katati elaborated on the primary purpose of the EPF, stating that it was established to protect the government from shouldering all environmental liabilities stemming from mining activities.
He further noted that prior to the establishment of the EPF by the government, many investors were hesitant to take on the environmental liabilities associated with certain mines privatised by the government.
“Mining has left behind an environmental legacy that has rendered Zambia, particularly Kabwe, as one of the nine most polluted places on earth,” he said. “Additionally, in Mufulira, an area known as Kankoyo Township was one of the most polluted places within the Southern African Development Community region, primarily due to Sulphur dioxide emissions.”
He noted that despite the government’s creation of a commendable fund, a notable challenge remains, especially concerning personnel. He emphasised that the Department of Mines and Safety encounters a daunting undertaking in conducting mine audits for over a hundred mining companies nationwide, given its limited workforce of approximately six individuals.
“In such a scenario, how can they effectively contribute to environmental audits as required by law?” He questioned. “The law mandates that before mining houses contribute to the EPF, an annual environmental audit must be conducted.”
According to the 2023 final report of the Zambia Extractive Industries Transparency Initiative (ZEITI), the EPF has experienced adverse effects. The report, citing data from the 34th Meeting of the EPF Committee held in Lusaka from January 26th to 27th, 2023, reveals that fewer than 26 mining companies fulfilled their annual contributions to the fund.
However, in an interview with Fred Banda, Director of the Department of Mines and Safety, he revealed that despite the ministry holding numerous mining licenses, potentially up to about 500, not all are currently active or operational. He further indicated that approximately 83 mining companies are actively contributing to the EPF, suggesting that compliance levels may not accurately reflect a low status.
He acknowledged that there are challenges leading some mining companies to not contribute to the funds annually for the required five-year period before another audit is conducted. He noted that some companies contribute only once and then fail to contribute for the subsequent five years.
“As a department, we find ourselves continually following up on mining companies, which poses a significant challenge as we issue demand notices to ensure compliance with the law. This stands as our primary challenge,” he emphasised.
“When making contributions, companies are categorised and obligated to pay a specific percentage, ranging from five to approximately 20 percent, as a cash contribution towards the total closure costs. The remaining balance is expected to be secured in the form of a bank guarantee,” he elaborated.
He noted that obtaining a bank guarantee annually has posed significant challenges for most mining companies. According to the law, a bank guarantee must be acquired from a local commercial bank. However, finding a local commercial bank willing to issue such a guarantee entails considerable expense.
“The associated fees can be high, reaching as high as $4 million. Moreover, these fees are recurring, as the bank guarantee is valid for only one year, necessitating renewal annually,” he explained.
Banda emphasised that all holders of mining rights should undergo assessment and be required to contribute to the funds.
He stressed that this contribution should not be limited solely to large mining companies but should also include companies engaged in exploration and artisanal small-scale mining based on the nature of their activities.
However, he explained that due to limitations in capacity within the Mines Safety Department, there are areas that they are unable to cover effectively.
“Historically, the environmental section operated as a unit with only three inspectors, which proved insufficient considering the breadth of mining operations across the entire country.”
“Recognising this shortfall, we advocated for the expansion of the unit into a dedicated section. This led to a restructuring effort and the recruitment of additional environmental inspectors, doubling the number from three to six. Despite this increase, it remains evident that even with this expanded capacity, the department’s resources are inadequate,” he highlighted.
Banda highlighted that as a result, they encounter difficulties in including companies engaged in exploration and small-scale mining operations, both of which are also expected to contribute to the fund. He further explained that the EPF account presently holds $40 million, emphasizing that this figure is subject to change as the fund continuously grows due to contributions from mining companies.
Moreover, he clarified that the funds are not earmarked for government expenditure. Instead, they are retained by the government to address potential scenarios such as sudden cessation of mining operations by a company. In such instances, the funds would be utilized to mitigate any environmental liabilities that may arise.
“Furthermore, upon completion of environmental cleanup efforts by a mining company, restoring the site close to its original state, the department conducts inspections. Upon verifying satisfactory environmental restoration, two actions are taken: issuance of a closure certificate and refunding the contributions made by the mining companies towards the EPF,” he explained.
Banda outlined that the government has initiated measures to recruit a fund manager tasked with actively growing the fund. Additionally, the department is currently undergoing a review of the EPF regulations. The objective is to provide mining companies with more flexibility in their contributions to the EPF, ensuring they are not solely limited to providing a bank guarantee.
A mining consultant, who chose to remain anonymous, informed MakanDay that when the Ministry of Mines grants a license, it typically imposes various conditions, one of which is the requirement to contribute towards the EPF.
Interestingly, regardless of whether the license is for exploration, artisanal, small-scale, or large-scale mining, all license holders are mandated to contribute to the EPF. This raises questions about how companies in the exploration phase can begin contributing.
“At the exploration stage, environmental degradation due to mining operations is typically minimal until actual mining begins,” the consultant noted.
“For companies with the smallest categories of licenses, they often struggle to afford even the charges, which are already minimal. To be able to contribute to the EPF, they would need to hire a consultant. However, consultants typically charge no less than K25,000 to conduct the audit and prepare the necessary documentation,” he elaborated.
The source emphasised that there’s a perception that the fund primarily targets large-scale mining companies, who are also failing to comply.
He mentioned that the department of mines issues letters to mining companies requesting contributions to the funds, but compliance often hinges on the willingness of these companies.
Non-compliance can be interpreted as arrogance, especially when considering that some mines have government stakes. There have been instances where individuals, such as environmental compliance managers, receive these letters but choose to ignore them.
However, Banda from the Mines Safety Department argued that any mining company failing to contribute to the EPF is considered non-compliant by the department, potentially leading to sanctions, including license cancellation.
“It’s crucial to note that the EPF account undergoes audits by both the Ministry’s internal auditors and the office of the Auditor General,” he added.” Any individuals alleging corruption against the government should disclose their sources for further investigation, although it appears unlikely given the current system protocols.”
MakanDay has not encountered any instances of companies being sanctioned by the Mines Safety Department for non-compliance.
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